Back in March, Airbnb planned to file for an IPO that would allow millions of public investors to buy shares in the company. Because of the COVID-19 outbreak and a significant drop in business, Airbnb delayed the process and decided to move forward in August. On November 16, the company officially filed for an IPO.
Despite dropping its value from $31 billion to $18 billion during the pandemic, the company is aiming for an IPO valuation between $30 billion and $33 billion. As a vacation rental owner, it’s important to know what Airbnb going public means for your business and the future of the vacation rental industry.
What is an IPO?
IPO stands for Initial Public Offering, which Investopedia describes as “the process of offering shares of a private corporation to the public in a new stock issuance.” In other words, Airbnb will be able to raise capital from public investors as well as private investors.
However, the process is not that simple. The SEC, or the U.S. Securities and Exchange Commission, works to protect investors by setting strict regulations that companies must meet before going public. Airbnb is currently waiting for the SEC to review its draft registration statement, which usually takes one to three months. While no specific date has been announced, shares are predicted to be available as soon as December.
An IPO process begins with a pre-marketing phase and is then followed by the actual initial public offering. During the pre-marketing phase, companies advertise their offer to underwriters with private bids or a public statement. Once the main underwriters are chosen, they are in charge of leading different parts of the IPO such as document preparation, marketing, filing, and due diligence.
According to MarketWatch, Airbnb will list its shares on the Nasdaq Global Select Market under the symbol “ABNB”. The listing will be led by Goldman Sachs and Morgan Stanley, two of Airbnb’s underwriters in the prospectus.
Why Does Airbnb Want to Go Public?
There are several reasons why companies like Airbnb decide to go public, especially during times like this. While this list is not specific to Airbnb, motives may include:
Raising Capital
Going public is essentially a fundraising tactic. This is one of the main reasons most companies file for an IPO and it’s because the amount of money that can be generated through it can significantly skyrocket the growth of a company. From investing in new technology to hiring more employees, an IPO can transform an already successful company.
Company Exposure and Credibility
Although it’s unlikely you’ll meet someone that hasn’t heard of Airbnb, going public will continue to increase the company’s exposure and trustworthiness. Because IPOs involve a rigorous process, the result can range from improved credibility to simply more attention because of the number of analysts reporting every move. While this spotlight brings many good things along with it, companies also face many challenges from this type of recognition.
Providing Liquidity to Founders, Current Private Investors, and Employees
For over a decade, former and current Airbnb employees have been waiting to trade or cash out their shares. Because this can only be done when a company is public, people have been patiently waiting for this moment for years. Despite almost 25% of employees being laid off back in April when the pandemic hit the hardest, they continue to have their shares in the company and can still sell them despite not working for Airbnb anymore.
For founders and current private stakeholders of Airbnb, an IPO is an exit opportunity in which they can make back all the money and effort they have invested.
Increasing Value
Having a stock price associated with a company can help indicate its value. While an increase in value can motivate a company to go public, it also requires drastic management changes that can potentially affect consumers or users of the product.
What Does Airbnb’s IPO Mean for the Vacation Rental Industry?
Airbnb Will Offer More Transparency to Owners
Once a company goes public, it is required to share financial, accounting, and other business information like taxes. While this kind of information can be used by competitors to one-up the company, it can also provide security for users and those investing in the company.
Airbnb’s Long-Term Growth Strategy
In Airbnb’s prospectus, they stated their long-term growth strategy and how going public would help make it possible. As a vacation rental owner, knowing what goals and changes are in store will help keep you in the know.
-
Host and guest community
Not only has Airbnb stated that they intend on working towards attracting new guests and turning them into brand advocates, but they have also said that they will invest in growing the amount and quality of hosts on the platform.
-
Brand growth
Despite having great services to help both guests and hosts, Airbnb plans on investing even more into these resources.
-
Networking
As a vacation rental owner, the more exposure your listings have, the better. That said, Airbnb plans on expanding their global network even further. Not only will they target markets where their penetration is lower, but they will also strengthen the ties with markets that they already have a presence in.
-
Innovation and guest experience
Another extremely important change that will affect all vacation rental owners positively is that Airbnb will be focusing on innovation to increase guest experience. They plan on doing this by making their platform more accessible and appealing to users, leading to an increase in engagement and customer loyalty.
Conclusion
Once considered “alternative accommodation”, the short-term rental industry has reached an important milestone with Airbnb filing to go public. While we’re still uncertain of what the outcome will be, the mere fact that a vacation rental online agency has the capacity to file for an IPO is already a positive step towards more recognition and respect in the hospitality sector.
By using vacation rental management software and syncing it with Airbnb, you can further improve the experience of your guests. A channel manager will allow you to sync your calendar, bookings, and rates using an Airbnb API. Not only will you be able to connect your listings from different channels, but you’ll also have access to an easy-to-use centralized platform. This means less human error (like double-bookings) and much happier clients!
